Hindsight may show that the transport sector is in the midst of unprecedented change.

NZTA’s latest report on state highway traffic shows that volumes were down 1.2% in 2011. And if you look further back you can see that total vehicle volumes on the state highway network have been static since around 2004. In the same period, New Zealand’s population has increased by approximately 7%, while real GDP grew by around 11% (Sources: Statistics NZ and Reserve Bank of NZ). Taken together, this data suggests that per capita demand for vehicle travel has declined by around 1% per annum in the last seven years.

The plateau in vehicle volumes since 2004 is an unprecedented change from the last century, when we experienced consistent growth in vehicle travel.

In the 1950s and 60s this growth was largely driven by a combination of increasing vehicle ownership and sustained low fuel prices. And then in the 80s and 90s increased workforce participation (i.e. baby boomers and two-income households) caused a second spurt in the demand for vehicle travel. Throughout this whole time drivers were aided and abetted (albeit unintentionally) by poor planning/pricing practises that subsidized vehicles over other modes of travel. Homogenous land use zoning and minimum parking requirements being among the most notable (despicable?).

Since 2004, however, this momentum has clearly dissipated: Vehicle volumes on New Zealand’s state highway network have been static or even falling. And as this earlier post notes very similar trends are emerging overseas, even in countries that are considered to be ‘culturally remote’ from NZ. This in turn suggests that the emerging trends in state highway traffic volumes in New Zealand are not a localised abberation, but in fact reflect broader forces that are changing people’s travel choices.

NB: The graph uses data up to 2007, which was the peak in NZ’s highway traffic volumes. More recent data would show a longer plateau or even the beginning of a downward trend. Nonetheless, a marked slowdown is already apparent in most of these countries.

So what gives? Why are kiwis (and people overseas) driving less? I think the following five factors are likely to lie behind the static/declining trends in per-capita vehicle travel that has been observed in New Zealand and overseas:

Travel saturation – People already drive about as much as they can, given other constraints on their daily lives. I suspect that for many people’s their lives are “saturated” by vehicle travel – hence they are unwilling to travel further. This was not the case a few decades ago …

Demographic shifts – The baby boomers are getting older and simply don’t need to travel so much, especially at peak times. Meanwhile, young people simply aren’t as attached to their cars as previous generations; smart phones are the new i-sexy item. Thus the need/desire for vehicle travel being undermined in both the younger and older age groups.

Ongoing urbanisation – While we like to tell stories about our rural heritage, the reality is that NZ is a highly urbanized population, and increasingly so. One of the key reasons people are attracted to urban areas is because they can reach many more activities without having to travel as far, especially by car. My parents are in this category – not only are they semi-retired baby boomers, but they have also recently moved into the “city” from a lifestyle block on the urban periphery. They now consequently drive far, far less than they did previously. And they love it!

Transport costs/policies – High fuel prices has slowly but surely driven small changes in travel and land use choices and increased demand for substitutes to vehicle travel, such as public transport and home delivery. In downtown Auckland and Wellington, the removal of minimum parking requirements has allowed the value of parking to rise to more reasonable levels, which has in turn driven considerable mode shift and allowed for more intensive development patterns (NB: Minimum parking requirements should be abolished). Meanwhile, the price of domestic airfares have reduced faster in real terms compared to car travel, which has subsequently chipped away at the demand for long distance vehicle travel.

Technological change – the internet, which powers this very blog, is having a profound impact on travel demands. Booking flights and internet banking are just two examples of tasks that are now routinely undertaken from home, without needing to travel anywhere. More interesting, however, is the impact on global/domestic supply chains. Whereas previously you would drive to the store to buy a book that had been delivered by truck from a warehouse, the same book is now delivered straight from the warehouse to your door, potentially replacing several intermediary trips. Meanwhile, online journey planners and smart phones have helped to demystify public transport networks. And finally telecommuting is slowly coming of age: I work from home at least 1-2 days per week and travel to work outside of peak times when I do, mainly because technology now makes it easy to do so.

These five factors are, I believe, causing much of the stagnation and subsequent decline in per capita demand for vehicle travel (let me know if I have missed something that you think is important!). And the key point is that (aside from fuel prices) they are all the result of people’s choices. And for this reason you would have to assume that the people making these choices are doing so because it makes them better off. Yes that’s right – Kiwis are driving less and they are doing so because it makes them better off.

Unfortunately, the government seems to be cursing kiwis for making these choices, or at the very least are in denial about the fact that is occurring. To provide a somewhat banal example, to access data on traffic volumes through NZTA’s website you actually have to click on a green box titled “Traffic volumes are growing – see how much“, as illustrated below.

Errr …. no, they’re not growing actually. And in the entire time that NZTA has existed as an organisation they have actually been falling. But, honestly, what do facts matter?

More concerning, however, are comments made by the General Manager of MOT. When he was recently questioned by parliamentary select committee on recent trends in traffic volumes, he suggested that we should not base future forecasts on recent trends. Errr …. yes, you should actually. The GM is mistaken for several reasons. Firstly, these trends are not that recent; they have been evident for approximately 7 years. Standard traffic engineering analyses will base their calculations of future growth on the last 5-10 years of data. This means that very soon what the GM has dismissed as a “recent trend” will actually be “the only trend in town” (unless of course transport engineers sneakily start extending their time horizons back in time). Second, as mentioned previously the very same trends are evident in other countries overseas, i.e. they seem to be a global phenomenon, and in some countries they have been evident for some time.

So what gives? If kiwis are driving less and loving it, why is NZTA and the MoT so keen to dismiss their behaviour as an irritating aberration? Do they begrudge the fact that people are freely and willingly choosing to curtail their driving? I’m not a conspiracy theorist but I can’t help but suspect that the attitude MoT/NZTA is quite deliberate and has nothing to with either a) reality or b) what the public wants. It’s all about them.

Very soon static/declining traffic data will have catastrophic implications for the business cases of many of their projects. The Puhoi-Wellsford business case, for example, assumed annual traffic growth of 4% per year over several decades, before being “trimmed back” to only 1.5% thereafter. So if the MoT/NZTA actually acknowledged that traffic volumes were not actually growing that much, then it removes much of the justification for their pet projects. It’s really just pure, unadulterated bureaucratic self-interest (please, can someone who lives in Wellington track Bill English down and let him know that the MoT/NZTA are out of control and are wasting billions of dollars? As Minister of Finance he really needs to know).

Given that the views of MoT/NZTA are increasingly irrelevant then we will just have to think through the wider implications of the decline in per capita travel demands for ourselves. Here are just some impacts that spring to my mind (I’m sure there are others):

Major road capacity expansions should be deferred: Overall vehicle volumes are not increasing – not unless the background population growth is sufficiently large to offset the decline in per capita demand for vehicle travel (approximately 1% per annum). I would suggest that all major highway capacity expansions are deferred for the foreseeable future.

Declining fuel excise revenue – NZTA and the MOT will simply have to make do with less money. The revenue implications may even be amplified by a shift towards more fuel efficient cars, which pay less excise tax per kilometre. With less money coming into the NLTF it’s important that public transport becomes more efficient and reduces its dependence on operating subsidies. Otherwise we risk being in a situation where we have increase demand for public transport, but less revenue available to fund it.

Flatter peak travel demands – the factors listed above are also likely to result in flatter peak travel demands. I expect that (semi-)retired baby boomers will simply elect to arrange their lives to avoid travelling during the peak period, and why wouldn’t you? Also, technological changes may continue to cause more people to work from home in the morning before heading into the office later on. Taken together, I would expect the peak/base ratio to reduce over time.

Public transport networks need to focus on all-day travel – This is a natural extension of the previous comment. Our public transport services typically focus services on meeting demands during peak periods, rather than all-day travel. As travel patterns increasingly disperse (in a temporal sense) they will need to focus on all-day demand patterns.

None of this is to suggest that roads will suddenly be unnecessary or that targeted capacity expansions are not needed. Indeed in rapidly growing areas some capacity improvements may well be warranted. For the average New Zealander cars will still be “king”, and will continue to be so for the forseable future.

But the key point is this: Decisions on major new investment should be driven by the marginal user; it is their behaviour (rather than the average users) that should be the primary determinant of future investment. And it seems patently clear (based on the available evidence) that, at the margin, New Zealanders are choosing to reduce their demand for vehicle travel. To put it bluntly MoT/NZTA need to wake up from their self-induced coma so that they can revise their planned transport investments in light of this “new information” (which I guess in Government is defined as anything that happens within the last decade or so, or if you’re a conservative then anything within the the last millennium is considered “recent”) .

It’s quite simple really: Per capita demand for vehicle travel has been declining steadily for around seven years and for many people, like my parents, has left them better off. We’d be even better off, however, if the MoT/NZTA recognised that these changes were occurring and responded by revisiting their proposed transport investment mix. How about it?

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66 comments

Very important and well argued post Stu. And this is the context: What we invest in acts as an incentive increase use. We know that investment usually promotes use, and we can certainly see that in public transport figures in Auckland, take for example the rise in train use since the network began improving, ridership has leapt dramatically. But despite the multi billion dollar investments in attempts to making driving more attractive over this period it is becoming clear that we just aren’t buying this product. So what we can take from this is that investment in improved routes is not enough to encourage use; other factors are at play too. It is long overdue that these agencies and the government invested where there is the need and ceased trying to force every movement of people and goods onto the one already dominant and stagnating mode. Current policy is not fiscally prudent but ideologically driven and dangerously wasteful.

I think it partly reflects a fairly mature road network: the RoNS pretty much all duplicate existing routes [both road + rail] routes that all still have excess capacity, so there is very little opportunity for any of them to provide a breakthrough improvement in opportunity for movement. Even where the new route shows an increase this is merely because of a decrease elsewhere; no net increase.

Anyway what sensible government anywhere is trying to promote vehicle use?, especially where there is excess demand for alternatives crying out for investment, alternatives that greatly reduce the negative externalities of road movements and reduce peak pressure from the existing network. Nutty. Plainly not fact based, imprudent, and, frankly bordering on the scandalous.

Just how close are these agencies and this government to the road construction and road freight sector? Incompetent or corrupt?

If you graph the annual traffic growth rates for the periods 1915-1935, 1960-1980 you will find that the “The plateau in vehicle volumes since 2004 is an unprecedented change from the last century” is quite incorrect and thus the precautionary principal compels the MoT and NZTA to assume that history will repeat. Of course, the precautionary principal also compels them to regard peak oil as a crank theory until such time as the brainiaks at Treasury change the Government’s official position.

Kevyn – are you suggesting that there was no growth in vehicle traffic in NZ from 1960-1980? That seems to conflict with the historical data on vehicle registrations (acknowledging that vehicle registrations is not exactly vehicle traffic, although I would have thought the relationship was quite strong).

No Stu, I am suggesting that there was growth from 1960-1974, then no growth from 1975-1980, and that traffic planners reluctance to regard the recent flatlining of traffic growth as a good reason to stop building more capacity is because of the precedent set in the 1970s, and from which they are still playing catch-up.

Although they do seem to be ignoring the fact that fuel prices aren’t rising because of cartel manipulation this time so there’s no reason to actually think that real fuel prices will fall significantly in the future, which is what happened in the 1980s.

Hi Kevyn I think it is becoming clear that the chances are that this time will not be the same as 75-80 are firming up. And the precautionary principle would in fact encourage waiting to see if this current trend- already out to 7 years- persists without making aggressive and ambitious investments with precious taxpayers money, ie pause the RoNS.

What is different? As you point out the oil price has not been manipulated to its current levels through artificial supply withholding unlike in the seventies- It is clear that everyone is pumping flat out yet important fields are still in decline and demand is still growing: Geological limit is the best explanation, especially of accessible oil. NB: OIl source of 98% of transport fuel in NZ [MoT website].

A real technological and cultural shift is apparent in OECD countries with regards to the desire for cars and driving. And whatever MoT and gov like to say the vast bulk of traffic is personal travel.

My money is firmly on this being a discontinuity with the past of the oil age and not a repeat; and what if it isn’t?; nothing is lost, we can go back to adding State highways if we find we need them in a few years, but if we keep blowing this cash resource and it turns there is little demand for it it will have been a huge and impoverishing disaster of a policy. The RoNS are a gamble and a very low odds one at that.

Additional reason to be cautious: We have a mature road network much more in need of maintaining and complementing with alternatives than expanding and duplicating; ie no or poor growth outcomes from this huge investment anyway.

That’s the official equivalent of ‘these aren’t the droids you are looking for’.

I think that number 1 in your list, while probably true, is not really relevant given the drop in state highway driving. If all of those who made up the 7% growth in population also drove to saturation there would be a 7% growth in driving. I’d order you list with 4 at the top and another couple of points.

There is a widespread drop (in my opinion) in the whole concept of the ‘love of driving’. People drive to get from A-B, probably in a car they hate. Not so long ago the concept of going for a drive would be a fun experience. For some reason that’s not so much the case anymore- especially when commuting which for most is either boring or hell depending on their travel options and route.

And you don’t mention the increased eco awareness and concern. It’s not the greenest thing to drive a large piece of metal across town by yourself burning fossil fuels. There’s a sizable percentage of the population that has probably considered this and revised their travel arrangements to be more efficient.

Helpfully decreased income in the form of road user taxes will result in a smaller and better targeted road building program. The current planned projects are too expensive and hardly justified in an era of flat lining traffic growth.

Yes you’re probably right – #1 was important for causing a slowdown in growth but would not explain the drop in per capita travel demands. This does mean that numbers 2-5 are increasingly important explanatory factors. Disagree with the suggestion that 4 is most important though: The real price of fuel/parking has not increased that much faster than income/inflation, and demographics are so, so important.

“Where is the love” when it comes to driving? As you note, it is disappearing methinks. The eco-awareness point is interesting. I wonder whether it is truly relevant beyond a limited circle of well-to-do champagne socialists? Or whether it is resonating with people’s values? I hope it’s the latter.

Decreased income in the form of lower road user taxes will cause MoT/NZTA to sharpen their pencils, but I do fear that if cuts have to be made then they will be disproportionately felt by “non-highway” NLTP funding categories.

Boring as hell, stressful, and now terribly expensive. It will only get more so as oil prices sustain their growth and increased regulation of imports is pushing the cheapest old vehicles off the road.

The demographic shift in bus use in NZ has also had an impact. As they become normal, and are no longer merely for ‘society’s outcasts’ (the young, old, poor, and disabled), they take away vehicle miles from cars.

For the record: 1. I enjoy driving and got my license as early as possible. 2. I apologize if my response came across as being rude, it was not intentional.

Try thinking about it this way: Saying that you “love driving but hate traffic” is equivalent to saying that you “love eating but hate being fat.” The irony exists because there is a cause and effect relationship between what you love (driving) and what you hate (traffic).

There is no cause and effect relationship between cycling and rain, so (in my opinion) your comparison is invalid. That’s all I’m saying …

I love to drive :-), but not on crowded roads 🙁 (and operating a vehicle in heavy traffic isn’t really “driving”). It’s like trying to do lengths at the pool on a summer’s day – no fun when it’s crowded. 🙂

So I take the train during the week, and drive my classic cars on the weekend. 🙂

A little additional point; NZTA define a bus as a heavy vehicle, fair enough, they’re heavy. But it means that as the Northern busway booms some not insignificant [but unquantified] growth in ‘Heavy vehicles’ on the bridge, a key SH1 counting point, reflect the on going growth in public transport. This is important because arguments for hideously expensive additional road crossings will use this figure when really it is evidence for a dedicated, and cheaper, transit only crossing.

If buses are classified as heavy, then why is the percentage of heavy vehicles using the Albany bus station offramp in 2010 only 5%? Same goes for the “Northern Busway onramp” just prior to the bridge.

Patrick, good point, if you study those NZTA figures, you’ll note that the only reason those graphs go upwards or even stay flattish is because “Heavy traffic” is going up and it offsets the light vehicles numbers which are dropping like a stone so the nett effect is flat or a slight upward trend.

When you look at the light vehicles (which would be private cars etc) numbers they are trending down quite markedly. This indicates that less people are using cars and using alternatives (like Buses).

What all this means is that the planners in Wellington are going to shift their mantra from “as people are driving (cars) more and more each year and so we need more roads” to “more and more of the traffic is made up of heavy vehicles, so we need more roads that can handle them as the current roads are only designed for cars”.

NZTA/MoT win either way – they get their RoNGS built no matter whether its caused by too many cars or too many trucks.

I’d love to see what the research has been (here and abroad, academic and otherwise) on the effect of falling air-travel prices on road use.

My own experience suggests that it’s quite significant. Early last decade I’d quite frequently drive Auckland-Wellington-Auckland or the reverse, clocking up 1400km in a go. Petrol was less than $1 per litre, and cars were cheap. It’s what my parents did, and theirs before them. Now I know hardly anyone who’d drive that distance if they could avoid it. It simply doesn’t make sense at any level – it’s much cheaper to fly, and saves me most of two days. I suspect that for point to point travel over distances 450km+, it’s easily the dominant mode.

Extremely good point, I agree it’s significant – and sad to think that this government is subsidising long distance passenger travel by road, thereby under-cutting the attractiveness of flying – when the govt is majority shareholder in Air New Zealand! Were disbenefits to the air industry from the RONS considered in their business cases? If not then someone had the rose-tinted glasses on while driving.

When I was a boy we always used to have holidays in NZ and driving was involved. Now days people seem to fly somewhere foreign for their holidays. That probably saves 1500km per household for a start.

I’ve found I’m doing less business travel as it becomes easier to video-conference. In my case this eliminates flying more than driving, but that is because I work for an Aussie company and I suspect the same effect would apply if I worked for a company headquartered in Hamilton (say). I use Skype with video for informal contacts and a proper video-conference suite for anything involving customers. I only pop in to the office once a year, and I have a team of Aussie colleagues working on one of my projects for the last six months and so far only two of them have had to cross the Tasman.

I’m convinced that video-conferencing is going to revolutionise work. Partly this is a great thing… If people wanted to they could live on Great Barrier or Franz Josef and still work for a business in Auckland. This might help make rural NZ more vibrant and viable. On the other hand, I think we’ll lose the benefits of interacting over lunch or by the coffee machine.

The Ministry of Transport’s vehicle fleet statistics show quite a significant decline in car ownership rates over the past few years too. It hit around 700 cars per 1000 people in 2007 but has dropped to around 680 by 2010.

Very interesting Neo (middle name Liberal?). That’s a 3% drop, about the same as the drop in volumes. You would expect that all the factors causing the latter would also reduce the utility attached to private vehicles. Plus things like car-share etc may have pushed it down further (although the effects would be negligible at this point I suspect).

Vehicle travel per head has been falling in a number of nations for some time,and yes, it does call for a rethink of the economics of road investment. No problem there.

But a couple of comments to temper your optimism, though. First, I suspect the big drivers are demographics and economics. See my latest blog at Cities Matter on demographics. On economics (and I haven’t done the research on this), I suspect that the real cost of fuel is creeping up and that the cost of motoring, driven down for a long-time by more efficient vehicles and the falling vehicle costs, is stabilising if not increasing. We do know that the cost of fuel is creeping up in real terms, and will continue to do so, and that this does elicit a downward response in demand.

But I don’t buy the i-communciations substitution argument. The experience of post-war communications has been that as they improve, so the demand for travel increases with them. As people’s networks grow and deepen so the demand for face-to-face encounters increases. Whether or not this is cause and effect or simply two sides of technical progress I can’t see the next generation of social and commercial networking reversing this. This phenomenon explains the explosion in air travel since the 1970s(along with the impact of wide body jets and improvements in aircraft technology).

And don’t expect that demand to moderate. Your parents may have cashed up in their move to the city – so are they taking advantage of the all-time low fare deals around New Zealand and beyond, because a lot of the retiring baby boomers I know are. (So are a lot of Asians with their increasing incomes and the proliferation of low cost carriers).

And therein lies a conundrum. More and more we fly offshore and hire cars or jump aboard coaches and drive around the countryside in Australia, the UK, Europe, Canada, the States. Where is the environmental benefit in that? In the baby boomers we have whole generation of people with more time and more means for travel – but more of it will be in someone else’s backyard.

The real cost of petrol has been trending up at a reasonably slow rate, but I don’t this is the reason for the flatlining of the growth…otherwise we would have seen a revision to historic trend growth throughout 2009 due to the dramatic drop in petrol costs that year.

Phil I think you are completely unaware of a generational shift that is happening, has happened. The kids want to be online not behind a wheel. And for the same reason that our generation wanted to drive. It’s social,: they would rather be on a train and on their smart phone than saddled with the costs, responsibilities, and limitations of car ownership. To put it bluntly when Steven Joyce was a teenager in some provincial part of NZ sexual success was predicated on access to a car, that simple fact is no longer true; it’s over. At least that is true in Auckland, the country’s only city of scale. And there is so much to gain from it. I really don’t understand why my generation feels so threatened by this.

Thanks Phil, and yes Neo that was my point exactly – which I think Phil agrees with. Some comments: 1. Yes demographics and economics are very important, see points #2 and #4 in my post. Agree that fuel prices have had an impact. 2. The i-communications argument is an interesting one. I believe that it has helped people to have more business/personal relationships over longer distances. So rather than people’s social circles being limited by geographical proximity, we can now go further afield. In NZ’s case I believe that this has certainly reduced the demand for vehicle travel and increased the demand for air travel. 3. My parents don’t fly, but they do drive a hell of a lot less (especially at peak times) since moving in into the city. Fully admit that’s a sample size of one, but most of their friends of the same age are considering similar moves from I here. 4. I agree with Patrick; there is a generational shift occurring in the consumer preferences of younger people. It shows up overseas too – in the U.S. the average age at which people get their license has trended up considerably in the last few years. Cars simply don’t have the same appeal that they used to. They’re still useful, just not so desirable.

The really disappointing thing in MoT & NZTA’s briefings to the incoming minister is that none of them discussed this critical matter in much detail, if at all. That was the one chance for them to break free of their political shackles (as they don’t know who the incoming government will be when they write the document) and yet they ignore the $10 billion elephant in the room.

It must be soul destroying to work in those organisations if you have more than a few braincells.

Just being cheeky :). But it does seem that since 2004 people have made choices that has progressively reduced their demand for vehicle travel. And because it started in 2004 it came before any major spikes in fuel prices or economic issues associated with the GFC. So my hunch is that (at least in the beginning) the choices that reduced vehicle travel were made of people’s own volition, i.e. they were not forced by circumstances beyond their control and instead because they were better off from driving less.

The “loving it” comment is actually a personal reference to my parents experience, who have recently moved into the city and are driving a lot less and enjoying it immensely. My expectation is that their experience is indicative of baby boomers in general, but I may be wrong. There is also irony in saying that people are “loving it” – because that is the excuse sometimes given for why people drive!

The problem I have with your posts is the way in which you “attack” private transport. I use private transport every day and public transport Monday to Friday, so I see transport as car + PT (both have benefits/disadvantages, so its up to people to weigh up their alternatives). From your side you see those in government as one-sided, with intent to attack public transport by refusing to fund the proposals. You don’t respect them do you, but are you in a way just like them?

In no way am I trying to discourage you, your passion is great, but your articles could be less “controversial”.

Hmm, I struggle to see this as an “attack” on private transport but rather an attack on NZTA and MoT. However, as far as attacks go, this one uses statistics and graphs from around the country which are nigh on impossible to dispute. What are people, particularly transport professionals supposed to do when a bunch of numbskulls at NZTA and MoT disregard all academic and professional knowledge merely to further their own (archaic) ideas of transport? The RoNs are merely the vessel of political bias and prejudice with very little or indeed no rationale arguments.

Look, $10bn NZ dollars are being spent on an already saturated market where demand is in decline. Is this not enough proof that the guys in charge are utter morons?

This title and style of writing is cheeky as Stu says, because that is one argument that PT advocates over the past have met — the whole, “but NZ’s love to drive.” It really is, as Jerry Brownlee would say, a bit of a joke.

Hi Chris, not sure why you think this is an attack on private transport? I state quite clearly that roads are still essential and that cars are still king, insofar as they provide for the bulk of people’s travel demands.

I also drive and use multiple modes, so no argument about transport being more than just public transport (in fact if I was picking modes that had been particularly hard done by then it would be walking/cycling, not public transport). Yes, there are benefits/disadvantages from different transport modes. This post argues that the data shows people are increasingly reducing their need to drive (here and overseas) and I suspect they are in the process making better use of alternatives. The people (or at least the marginal users) are voting with their feet. And that this in turn has implications for the way MoT/NZTA manage the transport system.

As for whether individuals in government are one-sided I cannot say. What I can say is that MoT/NZTA has a bureaucratic incentive for traffic volumes to grow and they have a similar incentive to downplay factors that suggest volumes are not growing as fast, or even may be skrinking. That incentive clearly comes through in their rhetoric (e.g. website). It is also the subject of a field of literature that shows that the assessment of transport projects (road and rail) systematically overstates the benefits and underestimate the costs. Basically, there is a well-studied and well-proven systematic bias in the transport sector; the only question is how we can manage it?

Of course we should not forget that the RoNS are the creation of the particularly unenlightened Minister of Transport; there may well be many people at the MoT or NZTA who disagree with those projects. But on an organisational level, at least, they have to support/implement the RoNS and that is the level I am working at. It’s not personal: It’s organisational. For example, the mistakes of made by the GM of the MoT may or may not be of his own making: It may be due to bad advise. But either way, the Ministry is not churning out suitably sophisticated analyses/explanations of trends in travel behaviour and that is a problem.

Finally, as to the general “controversial” tone of my posts: There is, as Phil, notes a certain degree of cheekiness in these posts. But I appreciate your comment and will keep it in mind when writing future posts. This post in particular has been brewing for a while (7 years in fact) and so a certain degree of frustration comes through in places :).

Isn’t it true that all of NZTA’s revenu comes from fuel excise, tolls and road user charges? It would seem that their revenue pool is liable to shrink as demotorisation continues,

but has anyone considered the conflict of interest? The more NZTA funds public transport, walking and cycling, the fewer VKTs and hence the lesser their income. Well at least they’re not a private company, but how many organisations work to put themselves out of business?

And as long as we ARE driving and STILL using one of NZTA’s most recent triumphs, I still can’t work out why we can’t pay tolls via mobile phone. I can pay for parking Central Auckland via txt and I have NO IDEA why I have to confirm the maker and colour of the vehicle I’m paying for every time I pay. It’s a simple transaction with the vehicle registration as the primary key for processing purposes.

Excellent article Stu, and it totally highlights the absurdity of this government and its transport agency pouring $13bn into new road construction. This National-led govt claims to uphold fiscal responsibility and sound commercial management. Why then is it ploughing on with this massive spending programme, on projects which in some cases have demonstrably poor business cases, in the face of flat-lining traffic volumes, and at a time when energy-costs and emission-constraints are likely to further dampen demand? I can only conclude that the ministers and civil-servants promoting these roads are banking on some imminent breakthrough in alternative energy technology in order to usher in a brave new era of cheap and clean motoring. Well OK, who knows what might come out of left-field, but the available evidence is strongly pointing the other way. So find me any fiscally-responsible, commercially-sound, private-sector investor (so revered by this government?) who would base a $13bn business decision on such a flimsy foundation as this? It wouldn’t happen! This RoNS programme has to be the most extreme example of socialistic, nanny-state, we-know-what’s-best-for-you policy (so detested by this government?), and is only possible because its perpetrators have control over public money/assets and no accountablity for the ultimate outcome.

I agree Dave. The RoNS are incredibly interventionist, along the lines of Muldoon’s “think big” projects. At least the latter were targeted to nascent industries where returns to scale were obviously present and government intervention was arguably more necessary. In the case of the RoNS they simply represent marginal improvements to an already reasonably comprehensive road network. And in many cases they may simply be getting people to drive who would have otherwise flown.

Somewhat ironically the failure of the think big projects was in part due to oil prices not rising as expected post the oil shocks of the 70s. They’d probably stack up better today. However they remain probably the single biggest loss to the NZ taxpayer ever.

the two that probably did not are Electrification of the NIMT and the Clyde Dam.

I can’t recall exactly, but these projects did run over budget (Clyde Dam by about 50% at least), but over the past 30 or so years both of these projects have more than paid for the original investment several times over. It is also a little sad that the original plan to electrify the NIMT didn’t go as intended, all the way between Auckland and Wellington either.

Yep, the others all were all a major drag (on both taxes and foreign exchange – at least initially).

And the real losers are us collectively, not just as tax payers but as voters. Politicians ever since then have used Think Big as the reason why governments shouldn’t ever get involved in “Private Enterprise” by picking winners and losers in any industry.

Which is in part, one large reason why we’re where we are today with PT and transport in general…

Well put Greg. Agree with your more nuanced than usual interpretation of “Think Big.” There are economies of scale in some industries that potentially warrants government intervention. Unfortunately road networks are past that point – and possibly (in the presence of congestion and induced traffic) we are now seeing diseconomies of scale.

Joyce wants to meddle like he has with transport, believes he knows the winners, English believes gov should never be involved. Both are scared by Think Big: English as he thinks it proves gov is always wrong and market always right; yes that old over-simplification. And Joyce because he thinks it proves that things he likes; road freight, private cars, commercial broadcasting are always best and are all you need, and gov’s role is to reinforce their dominance in the name of efficiency. English is classically Laissez Faire, an old fashioned paternalist. Joyce is a free market interventionist, and a bit of an interesting hybrid; the meddlesome neo-lib. More like Muldoon than anyone since, so the Think Big issue is highly relevant. He shares his certainty, his skill at real-politik, his anti-sophistication. A little less rough perhaps and of our time but still arrogant and bullying. That super ministry; pure Muldoon.

The problems with English’s take are two-fold; we have recently seen the excesses that free-markets, by their very nature, result in, enough is said about that, but secondly in a country the size of NZ government is often the only player that can make real investments of scale [say like in electricity networks] or provide protection of balance to monopolies or cosy duopolies. It patronises those not already ahead in life too.

Joyce’s problem is that he is just flat wrong. Not about government doing things, but about what he does. As Stu shows above the billions on roads can never deliver on the economic claims that he makes to force them through. Joyce is energetic, cunning, and, above all confident. But not intellectually sophisticated, his certainty is his biggest weakness. He clearly exhibits the limitations of the personality type that is good at making personal fortunes in business but are not suited for the subtleties of running those messy complexities called countries.

Think Big was also about productive ventures, not money sinks. Roads are not producing anything, they’re simply an enabler of production that requires massive initial capital and extensive ongoing maintenance.

Not strictly speaking true. I’d agree that the main truck line electrification made sense. Clyde Dam was probably built 20 years earlier than needed, which would have resulted in the deferral of other projects at the time (though given what was been built at the time, not a guarantee of anything useful). 2 out of 8 projects ‘successful’ sounds a pretty poor return on investment.

Some of the projects where just plain stupid. The Gas to Gasoline plant basically took one unit of energy and turned it into half a unit of energy to enable it to be used in cars without modification. Subsided CNG installations would have given us the same result for way less, without the energy loss. There was talk at the time of the building of Clyde Dam that purchasing energy efficient (or at least what passed for energy efficient) fridges for every household would be cheaper than building the dam with the same result. Of course that wouldn’t drive the smelter being planned at the time.

I’m not quite sure how the Think Big failure can be attributed to the failure of successive governments to invest in PT. You could argue the opposite- they are in fact picking winners with their refusal to look at all of the options for transport, and ignoring statistics and advice. There is quite a difference between ‘public good’ activities which will only ever been funded (in what ever form) by the government and activities that the private sector is probably best equipped to handle (like the most cost effective way to provide fuels for cars or fertilizer). Interestingly the two most successful projects you identify were the ones most likely to fall within this category.

Conan, Yeah two out of 8 sounds a low hit rate. But consider there were other factors (external to the country and the Government of the day) at play as well and you can see the garden path they were lead down.

As for how it impacts PT, well since Think Big is now in retrospect made out to be “Epic Fail” – this fact has allowed Governments and Treasury ever since to plump for the Status Quo (here this is a “Do nothing” approach, or at the very best a “Do minimum” approach). As clearly Think Big shows Governments can’t be trusted to make good choices, so we don’t make any new ones at all.

We therefore get, by this process of active refusal to change our thinking or actions, what was put in train prior to the Think Big project failures. Which is reliance on cars and trucks as the way of the future, which no real investment in buses or trains (PT) anywhere. As those modes were considered to be yesterdays technologies at the time of cheap oil. Since then little has changed in real terms, and we’ve been playing catch up ever since with PT.

Re: your comments on only 2 of 8 projects being successful – some background on these other “failures”:

Gas to Gasoline project.

This project, like many Think Big project was actually done as a way to “free up” our dependence on oil (import substitution was the mantra then – reduce your imports by making the imports at home), the whole saga was caused initially by the 72/73 oil shocks (the first one), which triggered a lowering of the speed limit to 50 MPH (later when metrification arrived: 80 Kph) and acceptance of more economical transport (more 4 Cylinder Jap cars instead of V8 Fords and Holdens). The second shock in 79 when the Shah of Iran was deposed by the “Iranian Revolutionaries”, forming in essence the present day Iran – this second oil shock is what caused the Government to bring in carless days, more restrictions on weekend sales of fuel and prompted the rise of the CNG conversion.

These events prompted a major rethink of the way transport was used by NZ as a country and early warnings of Peak Oil (as we call it now) due sometime in the late 90s probably played a part.

At the time we were still trying to sell whole dead sheep to Britain, Europe and the US without success and our dairy and beef products faced major tariff barriers at just about every country we could sell them to. In todays terminology our “Terms of Trade” (exports versus imports) was awful, so if you couldn’t export your way to buy expensive oil you had to substitute it somehow and make it at home.

The thinking here was that every dollar spent not buying oil overseas was the same (in simple terms) as exporting another dollar of exports to buy that oil and this was in a world where we could not sell everything we made overseas – we had after all 20 times more sheep than people, rivers of milk, mountains of cheese and butter – as did Europe, the US, Australia, although they had a few piles of Kangaroo meat masquerading as Beef as I recall).

So cue the Great Maui Gas rush:

When Maui Gas was discovered the Government basically wanted Oil, not Gas. Gas was seen as a very poor consolation prize indeed. We couldn’t use it for heating or cooking like the UK did and we had no national gas distribution networks to allow that to be done. Oil was what ran the transport not gas. So the Government of the day wanted the Maui Gas “Gone by Lunchtime” – Jan 2000 or thereabouts was lunchtime in this context) and it wanted some oil instead.

So under the original Government permits for the Maui Gas field, the owners (the Shell/BP/Todd consortium) were obliged to use up all the Gas in the Maui field within 30 years of discovery (which was 1968/9 I think) – if they didn’t, they’d have to pay for any Gas they didn’t use – and the Government would then own the remaining Gas in that field and could then resell the gas to someone else to use – so the original owners had to use it up or lose big time paying for what they didn’t use.

This is the so-called “Take or Pay” arrangement. It was this single arrangement that prompted much of the wasteful use of Maui Gas in the 40+ years since. So the gas was going to have to be used up anyway, so what could we (NZ Inc) use it on then if you couldn’t cook or heat with it?

I know said the Government – lets run our cars on it and once the pipelines needed to let us do that are built throughout the NI, we can then use the gas to heat our homes and cook our dinners and run our factories!

So was born CNG Car conversion.

CNG car conversions were subsidised to a very large extent by the Government, if not explicitly, then by the way the taxes on CNG were set so that CNG was a way cheaper option, encouraging car drivers to convert to CNG in droves (which they did in the NI) most were dual fuel capable (GAS or CNG). The CNG came from Maui Gas which was not owned by the Government, Private Enterprise owned it, so they set the price for it. The Governent could however tax or not tax the CNG as much as petrol and thats how come it was subsidized.

CNG powered taxis and large private cars and Hi-Ace vans were de-rigeur in the 80s – mostly as they had the boot space for the large CNG tank.

You could also smell their fumes – they smelt like a running barbecue – so you knew how many CNG conversions were around by that alone (let alone the “CNG” sticker on the back of the car to alert the Fire and Emergency guys that this car was CNG powered in case it caught fire).

CNG option only applied in the NI, in the SI, LPG conversions were encouraged, but were not as price competitive as CNG as the fuel was more expensive and needed a different processing method – I can’t recall if LPG was made locally from Maui or not, I think it was.

“Gas to Gasoline” Think Big project only came in once the Government realised that not everyone could/would convert to CNG (and reduce our oil/petrol imports further), and would not therefore use up the Gas quickly enough.

BTW: The Marsden Point Refinery expansion and pipeline to Auckland was a Think Big project too – the idea was to allow NZ to refine its own (expensive) petrol from (cheaper) oil. Again making our oil dollars go further. This was seen as a success, maybe less so now.

Now, the owners of Maui (which were not the Government) also needed something else, really big, to use up the Maui Gas field “in time”.

The Gas to Gasoline was cooked up, it was a half-baked idea, it used unproven (but promising) technology on an industrial scale never before attempted, and it needed a huge government customer to guarantee to buy the resulting product and to help fund the development in a kind of early PPP. 30+ years on, this technology is now mature and works, and the original proponents (BP) are doing nicely out of it elsewhere thank you very much. Just not in NZ – Our gas is now too expensive and valuable to be wasted making petrol.

So, the intention with this was good, just that it was too much ahead of its time.

The same arguments can be trotted out for the similar Gas to Gasoline projects such as the Urea plant in Taranaki, decision for Huntly power Station to use Gas, the large Gas powered generators throughout the NI (Otahuhu, Stratford to name two). These were all prompted by the need to use up Maui in 30 years or pay regardless so it was priced cheaply to make people use it.

So thats why so many crazy Think big schemes were created. Heck they wanted to convert Maui Gas to Diesel too – but couldn’t make that work well enough, and if they could have made it work, we might have had CNG powered trains on the NIMT instead of Electric ones – imagine the size of the CNG tank wagon needed run one of those!

Clyde Dam:

The Clyde Dam was originally justified as you said as the power supply for the Aluminium smelter planned for Otago peninsula (a simplish way to “export” electricity is to use it to make Aluminium, as Aluminium is so electricity intensive all you are in effect doing with a smelter in a country with no natural Bauxite reserves is exporting electricity).

When this smelter didn’t go ahead (plummeting aluminium prices were the main cause here I think). The Government nearly canned the Clyde Dam which was seriously over budget and had a major problem with faulted rock on one side of the dam which required hundreds of millions of extra engineering works in 1980s dollar terms.

I think the saving grace was that the Government by then was (a) a Labour one and (b) realised they would need Clyde eventually even if they did not need it now – thats why they persisted in getting it completed.

Another reason why they even bothered to keep trying to build Clyde once the smelter went on hold was the NZ Steel refinery at Glenbrook.

This was another Think Big “import substitution” idea – make our own steel from our own resources (West Coast Iron sands and cheap electricity – made from burning coal, burning that cheap, “gotta be used up” Maui Gas or the spare power from Clyde we had hanging about in Gigawatt Hour bunches).

Turns out it was not such a good idea as the world market for steel tanked around the time the plant came on full production and steel refineries soak up money like sponges whether they are running or not, so the Government sold it off at fire sales prices to Private Enterprise, but the “private enterprise” it sold them to went broke after the 87 crash (same names there as those in todays Finance company crash headlines too) and refused to complete the transaction. The legal case for that dragged on well into the 90s. Again timing was against it. Idea was sound though – to a point.

So all up, yes, a lot of Think Big was really stupid in hindsight, as was not investing in PT and real workable alternatives to oil. The governments of those times had the right intention but were let down by major events, markets and previous agreements they could/would not control.

And in essence due to those earlier decisions by earlier governments (like the Take Or Pay agreement for Maui Gas) or the Motorwayification of Auckland and the running down of the Railways etc – the subsequent courses of action were in effect decided well beforehand.

So yep, Think Big has an awful lot to answer for. Its well past the time for Governments to stop the “Do nothing” option for everything and take a more active role in the PT and other areas that need to be driven by Central and Local governments (like integrated transport planning and even integrated ticketing). Especially by including those things which Private Enterprise will not do and also in those areas in which Private Enterprise will do, but not well enough or with the bigger picture in mind.

By the way, completely agree with you on roads. I’m just not getting how 5 mins time travel savings is going to transform the Northland Economy.

Going way off topic, I drove up to Northland a few weekends ago. Because any improvement of SH1 south of Wellsford is on hold there now is the situation where major recent works in two places north of Wellsford means the road is in way better shape north of Wellsford compared than south. These deferred improvements would be costing travel time and deaths/injuries that could be fixed now rather than in 20 years.

Completely agree with you. Have just entered the following comment on Final Draft of Auckland Plan – The final route (as opposed to the “indicative route” which we have at the moment) for Puhoi to Wellsford is due to be announced any day now. That’s when the real campaign starts. At present, any corresp. with NZTA, Minister, local MP’s and councillors is a waste of time as they all say “wait until the route is finally announced”. We’re promised end March/early April.

Middle Eastern countries are increasingly using more of the oil they produce, meaning that there’s less for the rest of the world. That has some potentially massive implications if the trend continues: http://www.economist.com/node/21551484

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